2019 (7) TMI 1786 - AT - Central Excise

100% EOU - short realisation in positive Net Foreign Exchange (NFE) - eligibility of breakage loss in transit (normal loss) - HELD THAT - As per Notification No. 52/2003-Cus. a 100% EOU is required to achieve positive NFE. It is further provided that in case of failure to achieve the said positive NFE the duty equal to the portion of the duty leviable on the said goods but for the exemption contained in this notification and the duty so payable shall bear the same proportion as the unachieved portion of NFE alongwith interest. Further admittedly the appellant have produced BRC s in support of full realisation of the export proceeds after allowing discount for brokerage in transit or genuine quality dispute raised by the buyer. Further appellant has demonstrated in the course of hearing that they have achieved positive NFE for each of the financial year during the period 2011-12 to 2015-16 the period under dispute. Thus the finding of the Commissioner (Appeals) that as per Notification No. 52/2003-Cus the proportionate benefit is recoverable if export proceeds are not realised is erroneous. Allowing of discount for damage in transit or quality dispute is normal loss in the facts and circumstances. Normal loss does not require any special treatment nor is required to be booked as a loss. Thus there is no case of short realisation of export proceeds in the facts and circumstances - Appeal allowed - decided in favor of appellant.

Issues:
1. Imposition of penalty and interest on the appellant.
2. Allegation of short realization of export proceeds.
3. Compliance with EXIM Policy and conditions for 100% EOU.
4. Appeal against the order of the Commissioner (Appeals).

Issue 1: Imposition of penalty and interest on the appellant

The appellant was in appeal against an order imposing penalty and interest. The appellant, a 100% EOU engaged in the manufacture and export of granite and marble slabs, was alleged to have short realized export proceeds for multiple financial years. The order demanded recovery of duty foregone, interest, and penalty under relevant sections of the Act. The appellant contended that the breakage loss in transit accounted for the alleged short realization, which was a common occurrence in the export of polished granite. The appellant argued that they had achieved positive Net Foreign Exchange (NFE) in all relevant years, fulfilling the compliance for 100% EOU. The appellant provided documents demonstrating discounts due to quality issues, which were accepted as genuine quality disputes. The Tribunal found that the appellant had achieved positive NFE for the disputed period and allowed the appeal, setting aside the impugned order.

Issue 2: Allegation of short realization of export proceeds

The show cause notice alleged that the appellant had short realized export proceeds, leading to the demand for recovery of duty foregone, interest, and penalty. The appellant argued that the discounts given due to quality issues were not suppressed and were accepted as normal losses in transit. The appellant presented evidence of discounts on genuine quality issues, which were considered as part of the export proceeds. The Tribunal found that the appellant had demonstrated full realization of export proceeds after accounting for discounts related to transit losses or quality disputes. The Tribunal concluded that there was no case of short realization of export proceeds based on the evidence presented.

Issue 3: Compliance with EXIM Policy and conditions for 100% EOU

The appellant contended that they had complied with the EXIM Policy and conditions for 100% EOU by achieving positive NFE in all relevant years. The appellant argued that the benefit under Notification No. 52/2003-Cus was dependent on achieving positive NFE, not solely on 100% realization of export proceeds. The Tribunal agreed with the appellant's argument, stating that the appellant had indeed achieved positive NFE for each financial year under dispute. The Tribunal found that the adjudication had been erroneous against the 100% EOU and set aside the impugned order, granting the appellant consequential benefits.

Issue 4: Appeal against the order of the Commissioner (Appeals)

The appellant appealed against the order of the Commissioner (Appeals) which dismissed their appeal. The appellant argued that the extended period for issuing the show cause notice was against the law, citing the essential pre-conditions set by the Supreme Court for invoking the extended period of limitation. The Tribunal found in favor of the appellant, allowing the appeal and setting aside the impugned order. The appellant was granted consequential benefits in accordance with the law.

In conclusion, the Tribunal allowed the appeal filed by the appellant against the impugned order imposing penalty and interest. The Tribunal found that the appellant had not short realized export proceeds and had achieved positive NFE, fulfilling the compliance requirements for 100% EOU. The impugned order was set aside, and the appellant was entitled to consequential benefits as per law.

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